Hind Copper charts revival plan for Jhagadia plant.

Hindustan Copper Ltd. has planned to revive the operations at its recently acquired 50,000 tonnes-a-year smelter-cum-refinery plant of Jhagadia Copper Ltd. (JCL) at a cost of Rs. 80 crore.

After paying off Rs. 210 crore for the acquisition of the plant and 75 acres of land from Asset Reconstruction Co (India) Ltd, it is now considering changing the raw material feed for the scrap-based unit located at Bharuch in Gujarat.

The largely debt-free Hind Copper has decided to fund a large portion of the acquisition -- around Rs. 200 crore -- through debt and the balance through cash flow. So far, it had fund and non-fund based working capital limits with the banks of Rs. 192.5 crore.

According to industry insiders, for the public sector copper miner, this move would significantly add metal making capacity but would involve considerable capital expenditure, which might eat into its profitability.

In a recent report, credit rating agency ICRA said in addition to Hind Copper's exposure to copper price fluctuations, volatility in profitability and cash flows, it is burdened by an adverse smelting and refining cost structure, marked by aged plants and lack of economies of scale.

Currently, the company has primary metal making capacity of just 19,000 tonnes a year at its 1930 vintage Ghatshila (Jharkhand) plant. The other unit at Khetri in Rajasthan remains shut down since 2008.

As treatment and refining charge forms insignificant part of the copper value, Hind Copper in recent years had stayed away from adding metal making capacity considering the low return on investment.

The company's present operating metrics suggest that it can profitably sale concentrates produced from its mines. This was the reason behind Hind Copper getting significant portion of its concentrate tolled from outside.

ICRA noted that Hind Copper's revenue fell by around 23 per cent in the first 9 months of 2014-15. This was because of 25 per cent lower concentrate production in the first three quarters.


HBL